Post Settlement Hearing Brief of Sierra Club And
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Maillog Number: ________________; Date filed: May 1, 2015 STATE OF MARYLAND BEFORE THE PUBLIC SERVICE COMMISSION In the Matter of the ) Merger of Exelon Corporation and ) Case No. 9361 Pepco Holdings, Inc. ) POST-SETTLEMENT HEARING BRIEF OF THE SIERRA CLUB AND CHESAPEAKE CLIMATE ACTION NETWORK Charles McPhedran, Esq. Susan Stevens Miller, Esq. admitted pro hac vice Earthjustice Earthjustice 1625 Massachusetts Ave., NW 1617 JFK Blvd., Suite 1675 Suite 702 Philadelphia, PA 19103 Washington, DC 20036 215.717.4520 202.667.4500 212.918.1556 [fax] 202.667.2356 [fax] [email protected] [email protected] Counsel for the Sierra Club and Chesapeake Climate Action Network MAY 1, 2015 TABLE OF CONTENTS TABLE OF AUTHORITIES .......................................................................................................... ii INTRODUCTION .......................................................................................................................... 1 ARGUMENT .................................................................................................................................. 4 I. Contrary to Applicants’ Assertion, the March 16 Settlement Does Not Include “Critical Parties.” ............................................................................................................................... 4 II. Exelon’s Commitment to Develop 15 MW of Solar is Designed Solely to Meet Exelon’s Statutory Obligations .......................................................................................................... 6 III. Pursuant to § 7-512.1(g), the Commission Cannot Accept the Settling Parties, Allocation of the Consumer Investment Fund (“CIF”) ........................................................................ 8 IV. The New Proposed Annual Reliability Targets Are Contrary to the Testimony of Exelon’s Own Witnesses .................................................................................................. 10 V. The Commission Can Institute a Utility of the Future Proceeding Without Applicants’ Commitment ..................................................................................................................... 12 VI. The Arrearage Forgiveness Commitment Will Have Little Impact ................................. 13 VII. The Energy Efficiency Commitments for Prince George’s County and Montgomery County Create Redundant, Inefficient and Unnecessary Administrative Processes and Programs ........................................................................................................................... 14 VIII. Several Commitments Demonstrate that Exelon’s Acquisition of the PHI Utilities Is Not in the Public Interest .................................................................................................. 15 CONCLUSION ............................................................................................................................. 18 CERTIFICATE OF SERVICE ..................................................................................................... 19 i TABLE OF AUTHORITIES Page(s) Cases In the Matter of the Merger of Exelon Corporation and Constellation Energy Group, Case No. 9271, Order No. 84698 ("Constellation Order") ................................................3, 5, 9 In re the Merger of FirstEnergy Corp. & Allegheny Energy, Inc., Case No. 9233, Order No. 83788 ("FirstEnergy Order") ........................................................10 Statutes Md. Code Ann., Pub. Utils. § 3-111 (a) ...........................................................................................9 Md. Code Ann., Pub. Utils. § 3-111(b)(2) .......................................................................................9 Md. Code Ann., Pub. Utils. § 6-105 ............................................................................................3, 9 Md. Code Ann., Pub. Utils. § 7-512.1(g) .....................................................................................8, 9 Other Authorities Chelsey Dulaney, “Exelon Profit Dampened by Weather, Expenses – Update” Wall Street Journal, Feb. 13, 2015 .............................................................................................2 Maryland Solar Jobs Census. http://www.thesolarfoundation.org/wp- content/uploads/2015/02/Maryland-Solar-Jobs-Census-2014.pdf.............................................6 Notice of RuleMaking Session,” Revisions to COMAR 20.50 – Service Supplied by Electric Companies – Proposed Reliability and Service Quality Standards, RM43 (March 3, 2015) ............................................................................................................12 PJM Environmental Information Service. https://gats.pjm- eis.com/gats2/PublicReports/SolarWeightedAveragePrice/Filter .............................................6 ii Sierra Club and the Chesapeake Climate Action Network (collectively, “Environmental Intervenors”) submit this Post-Settlement Hearing Brief in continued opposition to the proposed acquisition by Exelon Corporation (“Exelon”) of the power to exercise substantial influence over the policies and actions of Pepco Holdings, Inc. (“PHI”), including Potomac Electric Power Company and Delmarva Power & Light Company (collectively, “PHI Utilities”). As explained below, the Commission should find that Applicants proposed settlement agreement with certain parties1 does not resolve the many deficiencies in Applicants’ original application. Thus, Exelon’s request to acquire PHI must be denied. INTRODUCTION The extensive record in this proceeding demonstrates that the proposed acquisition fails to satisfy the three statutory requirements for approval. The acquisition is not in the public interest because it harms the State’s ability to achieve its energy policy objectives; offers no tangible benefits for PHI Utilities customers; and threatens harm to these customers. The March 16 Settlement does not cure these deficiencies.2 Specifically, the new commitments do not mitigate the harms identified by various parties to this proceeding. Moreover, the benefits proffered by the March 16 Settlement are largely illusory and thus Applicants have failed to meet the requirement that the acquisition provide tangible benefits to PHI Utilities customers. 1 Applicants Appendix C to the Reply Brief (Errata Version), Applicants Ex. 96 (“March 16 Settlement”). 2 Environmental Intervenors continue to advocate that the application must be rejected because the acquisition is not in the public interest and the harms caused by the acquisition cannot be mitigated. However, if the Commission approves the acquisition it should, at a minimum, adopt the conditions set forth in Environmental Intervenors Initial Brief at p. 36-38. The Commission could either impose an increased RPS percentage on the companies or require Exelon to develop or procure renewable generation equivalent to the increased percentages. 1 As discussed in detail in prior briefs,3 the proposed acquisition is not in the public interest because it would not further the State’s energy policy objectives. Furthermore, the alleged benefits of the acquisition are speculative and minor. Initially, Exelon claimed that “the PHI Utilities will join a larger enterprise and, in that way, gain access to a number of additional resources, including the financial strength of Exelon.”4 In light of the lack of a factual basis to support this benefit, Exelon quickly revised its position and now asserts that they had provided “compelling evidence that Pepco and Delmarva will not be increasing their relative ‘riskiness’ through the Merger…”5 The Commission should find that it is not in the public interest to authorize a potentially financially troubled company to acquire two well-funded Maryland utilities. Exelon derived 85 percent of its generation from nuclear power in 2013 and Exelon is the most exposed of its peers to a decline in natural gas prices.6 Exelon’s fourth quarter earnings show its generation business lost $91 million from a profit a year earlier of $269 million. Overall, Exelon posted a profit of $18 million, down from $495 million a year earlier.7 Essentially, Exelon’s financial health is questionable. The acquisition of a financially sound utility by a company with questionable finances should be viewed as a harm, not a benefit. 3 See, e.g., Initial Brief of Environmental Intervenors, Docket Entry No. 184 and Reply Brief of Environmental Intervenors, Docket Entry No. 205. The Environmental Intervenors extensively briefed the standard the Commission must apply in reviewing the acquisition, the harms caused by the acquisition, the lack of benefits resulting from the acquisition and a myriad of other issues. Environmental Intervenors incorporate those briefs by reference. 4 Direct Testimony of Christopher M. Crane, Applicants Ex. 8 at 5. 5 Applicants Initial Brief at 42-43. 6 See Deposition of Christopher M. Crane, MEA Ex. 1, at 48. 7 Chelsey Dulaney, “Exelon Profit Dampened by Weather, Expenses – Update” Wall Street Journal, Feb. 13, 2015. Environmental Intervenor Initial Brief, Appendix A. 2 Similarly, the claimed synergy savings are not only speculative,8 but these savings are meager at best. Exelon’s own estimate is that, after the synergy savings are achieved, and including the trails and the additional $34 million Exelon intends to spend on reliability, bills for Pepco customers would be about 80 cents lower a month for residential customers and for Delmarva residential customers about $1.25 less a month.9 The Commission